EMPLOYEE BENEFIT PLANS

Pension

The Company maintains a multiemployer defined benefit pension plan (the “Pension Plan”) administered by Pentegra Retirement Services (the “Fund” or “Pentegra Defined Benefit Plan for Financial Institutions”). The Fund does not segregate the assets or liabilities of all participating employers and accordingly, disclosure of plan assets, accumulated vested and nonvested benefits is not possible. Effective July 1, 2006, the Company froze the defined benefit plan by eliminating all future benefit accruals. Contributions to the Pension Plan are based on each individual employer’s experience. The Company bears the market risk relating to the Pension Plan and will continue to fund the Pension Plan as required. The Pension Plan year is July 1^st through June 30^th.

The Company’s participation in the Pension Plan for the annual period ended December 31, 2013, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (“EIN”) and the three-digit plan number. The funding status of the Pension Plan is determined on the basis of the financial statements provided by the Fund using total plan assets and accumulated benefit obligation. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. The “Expiration Date of Collective-Bargaining Agreement” column lists the expiration date(s) of any collective-bargaining agreement(s) to which the Pension Plan is subject.

Funding Status
of Pension Plan

FIP/RP Status
Pending/
Implemented

Surcharge
Imposed

Expiration
Date of
Collective-
Bargaining
Agreement

Minimum
Contributions
Required for
Future
Periods

EIN/Pension
Plan Number

2013

2012

Pentegra defined benefit plan for financial institutions

13-5645888/333

90.99% as of 7/1/2013

96.96%
as of
7/1/2012

N/A

—

Contributions to the Fund are based on each individual employer’s experience. The Company’s total contributions to the Pension Plan did not represent more than 5% of the total contributions to the Pension Plan as indicated in the Pension Plan’s most recently available annual report dated June 30, 2013. The comparability of employer contributions is impacted by asset performance, discount rates and the reduction in the number of covered employees year over year.

The Company’s contributions to the Pension Plan were as follows for the periods indicated:



			Plan Year Allocation
	Cash Payment		2013-2014		2012-2013		2011-2012
	(Dollars in thousands)
2013	$	2,603	$	1,762	$	841	$	—
2012	234		—		234		—
2011	2,217		—		—		2,217

The Company’s total defined benefit plan expense was $1.4 million, $1.6 million, and $1.9 million, for the years ending December 31, 2013, 2012, and 2011, respectively.

Financial information for the Fund is made available through the public Form 5500 which is available by April 15^th of the year following the plan year end.

Additionally, during 2013, as a result of the Mayflower acquisition, the Company acquired another multiemployer pension plan, which is currently frozen. The Company is in the process of withdrawing from this plan as of year end and as such, has not incurred, nor expects to incur, any expenses associated with this plan.

Postretirement Benefit Plans

Employees retiring from the Bank after attaining age 65, who have rendered at least 10 years of continuous service are entitled to a fixed contribution toward the premium for postretirement health care benefits and a $5,000 upon death benefit paid. The health care benefits are subject to deductibles, co-payment provisions and other limitations. The Bank may amend or change these benefits periodically. Additionally, the Company has acquired small postretirement plans in conjunction with various acquisitions, which do not have a material impact on the amount of expense realized by the Company. Postretirement benefit expense was $25,000, $82,000, and $46,000, for the years ending December 31, 2013, 2012, and 2011, respectively.

Supplemental Executive Retirement Plans

The Bank maintains supplemental executive retirement plans (“SERP”) for certain highly compensated employees designed to offset the impact of regulatory limits on benefits under qualified pension plans. The Bank has established and funded Rabbi Trusts to accumulate funds in order to satisfy the contractual liability of these supplemental retirement plan benefits. These agreements provide for the Bank to pay all benefits from its general assets, and the establishment of these trust funds does not reduce nor otherwise affect the Bank’s continuing liability to pay benefits from such assets except that the Bank’s liability shall be offset by actual benefit payments made from the trusts. The related trust assets, included in the Company's securities portfolio, totaled $8.5 million and $6.7 million at December 31, 2013 and 2012, respectively. At December 31, 2013 and 2012 these trust assets were held as available for sale securities and at December 31, 2011 the trust assets were held in the trading portfolio.

The following table shows the supplemental retirement expense, and the contributions paid to the plan which were used only to pay the current year benefits as of the dates indicated:



	2013		2012		2011
	(Dollars in thousands)
Retirement expense	$	1,049	$	1,144	$	794
Contributions paid	253		253		253

The following table shows the Company's best estimate of the benefits expected to be paid in each of the next five years, in the aggregate for the next five fiscal years thereafter and in the aggregate after those 10 years:



	Supplemental Executive Retirement Plans Expected Benefit Payment
	(Dollars in thousands)
2014	$	253
2015	288
2016	357
2017	351
2018	378
2019-2023	2,332
2024 and later	22,126

The measurement date used to determine the supplemental executive retirement plans benefits is December 31st for each of the years reported. The following table illustrates the status of the supplemental executive retirement plans at December 31 for the years presented:



	Supplemental Executive Retirement Benefits
	2013			2012			2011
	(Dollars in thousands)
Change in accumulated benefit obligation
Benefit obligation at beginning of year	$	8,714		$	7,550		$	5,953
Benefit obligation acquired	—			—			—
Accumulated service cost	429			627			351
Interest cost	409			296			325
Plan amendment	—			—			—
Actuarial loss/(gain)	(1,056		)	494			1,179
Benefits paid	(253		)	(253		)	(258		)
Accumulated benefit obligation at end of year	$	8,243		$	8,714		$	7,550
Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	—		$	—
Employer contribution	253			253			253
Benefits paid	(253		)	(253		)	(253		)
Fair value of plan assets at end of year	$	—		$	—		$	—
Funded status at end of year	$	(8,243	)	$	(8,714	)	$	(7,550	)
Assets	—			—			—
Liabilities	(8,243		)	(8,714		)	(7,550		)
Accrued benefit cost	$	(8,243	)	$	(8,714	)	$	(7,550	)
Amounts recognized in accumulated other comprehensive income (“AOCI”), net of tax
Net loss	$	938		$	1,276		$	1,056
Prior service cost	659			440			499
Amounts recognized in AOCI, net of tax	$	1,597		$	1,716		$	1,555
Information for plans with an accumulated benefit obligation in excess of plan assets
Projected benefit obligation	$	8,243		$	8,714		$	7,550
Accumulated benefit obligation	$	8,243		$	8,714		$	7,550
Net periodic benefit cost
Service cost	$	429		$	627		$	351
Interest cost	409			296			325
Amortization of prior service cost	113			113			112
Recognized net actuarial gain	155			108			4
Net periodic benefit cost	$	1,106		$	1,144		$	792
Amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit cost over next fiscal year
Net actuarial loss	$	18		$	151		$	103
Net prior service cost	$	113		$	99		$	112
Discount rate used for benefit obligation	4.95		%	4.05		%	4.40		%
Discount rate used for net periodic benefit cost	4.05		%	4.40		%	5.54		%
Rate of compensation increase	n/a			n/a			n/a

Other Employee Benefits

The Bank from time to time creates an incentive compensation plan for senior management and other officers to participate in at varying levels. In addition, the Bank may also pay a discretionary bonus to senior management, officers, and/or nonofficers of the Bank. The expense for the incentive plans and the discretionary bonus amounted to $8.5 million in 2013 and $7.8 million in both 2012 and 2011.

The Bank has an Employee Savings Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Employee Savings Plan, participating employees may defer a portion of their pre-tax earnings, not to exceed the Internal Revenue Service annual contribution limits. The Bank matches 25% of each employee’s contributions up to 6% of the employee’s earnings. The 401(k) Plan incorporates an Employee Stock Ownership Plan for contributions invested in the Company’s common stock. This Plan also provides nondiscretionary contributions in which employees, with one year and 1,000 hours of service, receive a 5% cash contribution of eligible pay up to the social security limit and a 10% cash contribution of eligible pay over the social security limit up to the maximum amount permitted by law. Benefits contributed to employees under this defined contribution plan vest immediately. The defined contribution plan expense was $3.9 million in 2013, $3.6 million in 2012, and $3.4 million in 2011.

As a result of the Central acquisition during 2012, the Company acquired an Employee Stock Ownership Plan, which is currently in the process of being terminated, pending approval from the Internal Revenue Service.

Director Benefits

The Company maintains a deferred compensation plan for the Company’s Board of Directors. The Board of Directors is entitled to elect to defer their director’s fees until retirement. If the Director elects to do so, their compensation is invested in the Company’s stock and maintained within the Company’s Investment Management Group. The amount of compensation deferred during 2013, 2012, and 2011 was $107,400, $88,000, and $136,000, respectively. At December 31, 2013 and 2012 the Company had 178,765 and 179,814 of shares provided for the plan with a related liability of $3.4 million and $3.2 million established within shareholders’ equity, respectively.